Are tankless water heaters worth the extra cost?

I got a call from my energetic, creative sister-in-law the other day that made me realize I’d been remiss.

“We need a new water heater,” she said. “I know you’re putting in an on-demand system at Sheep Dog, but Pete has been doing some research and he’s got some real questions about it.”

I then realized that early on in this venture in the green and, we hope, economical renovation of Sheep Dog Hollow, I concluded that we’d put in an on-demand water system and left it at that. I never gave the hot water question its own blog post, parsing the pros and cons.

Now this “Pete” that my sister-in-law referred to is my brilliant (I’m not biased), pragmatic, data-driven-doctor of a brother. He’s the kind of guy who regularly reads “Consumer Reports” and spends months researching a car or a washing machine along with its nearest competitor before deciding which to buy.

What I’d read and been told about on-demand hot water systems made excellent sense to me. Heat only what you need versus conventional water heaters that constantly keep the 20 to 80 gallons of water they store hot all the time. And that the Department of Energy estimates that hot water is responsible, on average, for 15 to 25 percent of a household’s energy bill.

A less objective source, the Tankless Water Heater site, gives this analysis:

“Most conventional heaters have upper and lower heating elements, one of which is cycling on or off 24 hours per day, even when you're not at home. Using a tank to continually heat and store water is akin to parking your car in your driveway and leaving it running all night at idle until its next use. Simply by eliminating stand-by heat loss alone, energy consumption can often be reduced by 20% to 30%.”

Those were enough to convince me. But now, I now have my brother Pete to consider. So, I’ll play my own devil’s advocate on his behalf. There’s no question that on-demand water heaters save in the long term, but cost a lot more than conventional ones up front – as much as five or six times as much. (Yikes!)

But if you look at the “life-cycle cost,” the investment appears worth it. The This Old House website has done a far better job than I ever could of summing up the short-term vs. the long-term costs:

Conventional tank heaters

A conventional gas water heater costs about $380, uses $179 in fuel a year and should last about 13 years. That's a total (life-cycle cost) of $2,707. A standard electric water heater costs more than twice as much to run and has a life-cycle cost of $5,680. Ouch!

Yes, you can turn down a conventional heater when you're not around. You can even shut it off completely as long as you know temperatures won't dip below freezing. But it takes time and energy to heat all that water back up next time you need it. It's not exactly a convenient solution.

Tankless savings

Tankless heaters use less energy because they're not trying to keep a tank of water hot all the time. A high efficiency gas heater without a pilot light [costs between 800 and $1100 and] costs only $90 a year to operate, and it should last 20 years. That adds up to a life-cycle cost of $2,370 - more than $300 cheaper than a standard gas heater.

Electric tankless heaters, by the way, aren't nearly as attractive. Their life-cycle cost over 20 years is an estimated $5,982 – about the same as a conventional electric water heater.

Consumer Reports, my brother’s respected bedside reading, has a rather different take. Its researchers contend that on-demand water heater systems aren’t worth the initial upfront costs and may not be all that user-friendly:

Gas tankless water heaters, which use high-powered burners to quickly heat water as it runs through a heat exchanger, were 22 percent more energy efficient on average than the gas-fired storage-tank models in our tests. That translates into a savings of around $70 to $80 per year, based on 2008 national energy costs. But because they cost much more than storage water heaters, it can take up to 22 years to break even—longer than the 20-year life of many models. Moreover, our online poll of 1,200 readers revealed wide variations in installation costs, energy savings, and satisfaction

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The problems their readers reported ranged from a need to upgrade the electrical panel to accommodate some on-demand water heaters to problems with water temperatures:

Water runs hot and cold

Manufacturers of tankless water heaters are fond of touting their products' ability to provide an endless amount of hot water. But inconsistent water temperatures were a common complaint among our poll respondents. When you turn on the faucet, tankless models feed in some cold water to gauge how big a temperature rise is needed. If there's cool water lingering in your pipes, you'll receive a momentary "cold-water sandwich" between the old and new hot water. And a tankless water heater's burner might not ignite when you try to get just a trickle of hot water for, say, shaving.

Nor do tankless water heaters deliver hot water instantaneously. It takes time to heat the water to the target temperature, and just like storage water heaters, any cold water in the pipes needs to be pushed out. And tankless models' electric controls mean you'll also lose hot water during a power outage.”

Fortunately, I have first-hand experience with an on-demand water heater in Europe. And in the next post, I'll take on Consumer Reports at least in two areas: the variable temperature problem and then the larger ethical question of costs: Should consumers simply think about nickel-and-diming their own energy costs, or look to the larger national and global need to reduce energy use for the good of the everyone?

Finally, my brother might actually read my blog posts!

Editor’s note: Alexandra Marks blogs on Tuesdays and Thursdays about her green and budget-friendly restoration of a 1902 farmhouse in Connecticut. Click here to find all her blog posts and articles.

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